Business Key Terms and Definitions

BUSINESS DEFINITIONS This list is not complete. These words have simply appeared on past papers before and may appear again. Words other that these may appear on your exam. In your exam for definition questions it is recommended you give them the full word perfect definition with no examples, but if you ever get stuck they may accept slightly vague definitions with a good relevant explained example instead. Don’t need both full definition AND example, that just takes too long. TERM DEFINITION EXAMPLE NICHE MARKET Small part of market consisting of specific customers with specialised tastes/needs. Kosher food FIXED ASSETS Assets owned by a business that are long term and held for at least a year. Buildings CURRENT ASSETS Assets owned by a business that can be quickly converted into cash. CURRENT LIABILITIES A company’s debts or obligations that are due within one year ORGANISATIONAL STRUCTURE Refers to the levels of management and division of responsibilities within an organisation COMMUNICATION Process by which information is exchanged between one group and another MARKET LEADER The dominant business in a market, due to largest percentage of total sales revenue, market share in terms of profit, revenue, output etc. FINANCIAL BENEFIT The monetary benefit a business gets in the form of profit made VARIABLE COSTS Costs that are directly related to production and change according to the level of production Raw materials, wages, component parts, packaging costs FIXED COSTS Costs that do not change depending on level of production and which need to be paid regardless of level of production Rent, insurance, salaries, mortgage repayments, rates, licenses to do stuff e.g. driving license PRODUCT ORIENTATED A business that focuses on developing a quality product first with the assumption that people will want to buy it rather than designing a product based on market research. Overdraft, short term loans, debts owed to creditors and suppliers Apple MARKET ORIENTATED A business does extensive market research and then designs products based on the results. AUTOCRATIC LEADER A leader who dominates their organisation and makes decisions without persuading or discussing with others. DEMOCRATIC LEADER A leader who involves other employees in the decision making process via ether consultation or persuasion and makes the final decision of the group. LAISSEZ-FAIRE Such leaders are non-authoritarian and give subordinates a lot of freedom with the belief that people excel when left alone to respond to their responsibilities and obligations in their own ways. HIGHLY MOTIVATED Workers with high morale and a positive work attitude, high job satisfaction, and enthusiasm. PRIVATE LIMITED COMPANY A company with limited liability with shares that can only be sold privately and not on the public stock exchange. SOLE TRADER A business where ownership lies in the hands of only one person who also has unlimited liability. ENTREPRENEUR An entrepreneur is a risk taker who injects money into a business in anticipation of profit. BATCH PRODUCTION When production is done in discrete groups where one set must be completed before the next possibly modified set can be started. FLOW PRODUCTION Where large quantities of a product are produced in a continuous process. NET PROFIT MARGIN Net profit/ Revenue x 100% PRICE ELASTICITY OF DEMAND (PED) Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price FLAT RATE A set rate of pay for a set number of hours per weeks e.g. $200 for 40 hrs per week TIME RATE Set rate of pay per hour for set number of hours, with any work done outside time *for all the ratios, for the definition just give the equation set paid at overtime rate PIECE RATE A sum of money is paid for every item of satisfactory quality produced BONUS A sum of additional money paid to employees as form of encouragement COMMISSION Payment is made up of a low flat rate and a percentage of the sales a salesperson makes PERFORMANCE RATES An employee is given a measurable target and when the target is reached a set sum of money is paid, and if the target is exceeded additional payments are made PROFIT SHARING Pay varies with the level of profit the company makes. When a target of profit is reached, the company either pays a set sum to each employee or a percentage of profits is given. MIXED ECONOMY An economy that has both a public and private sector. PRESSURE GROUP Non-profit and usually voluntary organization whose members have a common cause for which they seek to influence political or corporate decision makers to achieve a declared objective. MADE REDUNDANT His job position is gone and so he is no longer required. He loses his job but is given financial compensation. SECONDARY MARKET RESEARCH Information on the market, customer needs, and competition already available and collected by other agencies. PRODUCT LIFE CYCLE The change in level or pattern of sales of a product over time from launch to decline. EXTENSION STARTEGIES Usually of four basic methods to extend product life cycle, by either -creating new uses -introducing new features -seeking/ entering new target markets -rebranding so new image to appeal to new market segments CAPITAL EMPLOYED Money invested in a business on a long term basis -build and play rather than just play -new improved version with more features -entering foreign markets via exporting -new packaging LOSS LEADER A product sold below cost price to encourage customers to buy other products sold by the business. IMPORT QUOTA It is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. If a quota is put on a good, less of it is imported. FINANCIAL BUDGET A quantitative plan showing future financial targets for a specific time period. RATES Business rates is the commonly used name of non-domestic rates, a tax on the occupation of non-domestic property CASH FLOW The timing and amount of cash going in and out of a business EFFICENT Achieves objectives in a cost-effective manner